In this part three of our discussion of the foreclosure process on commercial real estate in Louisiana, we are detailing the procedures involved in ordinary process foreclosures in Louisiana. Foreclosing on collateral by ordinary process in Louisiana involves filing a civil suit against the mortgagor asking the court to recognize that the indebtedness is due and that the mortgage grants the creditor a valid lien on the mortgaged property.

The lawsuit will proceed as a normal lawsuit would, first with service of the petition on the defendant, with appropriate delays for answering. The suit will move through the discovery process to the summary judgment stage or through a trial on the merits. While the lawsuit is pending, the creditor may request that the court order the property to be sequestered (i.e., seized during the period of the lawsuit) by showing that the defendant has the power to conceal, dispose of, or waste the property or its revenues. La. C.C.P. Art. 3571. Essentially, this provides a mechanism for pre-judgment seizure of the property.

Once the creditor obtains a final judgment in its favor, and all deadlines for appeal have run, the creditor will need to request that the judgment be made executory and that the court grant an order for a writ of fieri facias (also known as a writ of fifa). The writ will be issued by the parish clerk of court and will direct the sheriff of that parish to seize and sell any property belonging to the defendant in the parish to satisfy the judgment. A positive benefit of utilizing the ordinary process foreclosure procedure is that the seizure and sale may include more than just the collateral property in the mortgage, as the judgment granted will grant the creditor a judicial mortgage on all property owned by the defendant within the parish.

Similar to the executory method of foreclosure, the seizing creditor will need to provide an appraisal of the property, if the property is being sold with appraisal and will need to provide notice of the sale to any other individual or entity with an interest in the property to be sold.

While ordinary process is not usually the preferred method for foreclosure in Louisiana, it provides a mechanism to seize and sell collateral property when the creditor cannot meet all of the requirements for use of executory process. This usually arises when the creditor may have acquired the loan and collateral from another lender and does not have the original note or instrument evidencing the debt, or if the mortgage does not contain a confession of judgment or is not in authentic form (i.e., executed before a notary and two witnesses).

An experienced lawyer can review a creditor’s loan documents to determine if ordinary process foreclosure the appropriate method to seek the seizure and sale of collateral property. Kean Miller works with lenders, servicers, and law firms from across the country on workouts, foreclosures, dation en paiement (read “deed in lieu”), note sales, and commercial bankruptcy cases. We would be glad to talk with you about how we may be able to help with your distressed credit situation.